Derivative Financial Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

11.	Derivative Financial Instruments

The Company uses derivative financial instruments to manage its foreign currency exchange rate risk. Forward currency contracts are executed to manage the foreign currency exchange rate risk on forecasted revenues and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). The Company also executes forward currency contracts to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge).

Forward currency contracts consist of (in millions):

Currency Denomination

June 30,

December 31,

Foreign Currency

2019

2018

South Korean Won

KRW

17,600

KRW

—

Norwegian Krone

NOK

4,199

NOK

5,229

U.S. Dollar

USD

680

USD

631

Mexican Peso

MXN

156

MXN

204

Euro

EUR

171

EUR

172

South African Rand

ZAR

124

ZAR

124

Japanese Yen

JPY

121

JPY

121

Danish Krone

DKK

Singapore Dollar

SGD

—

British Pound Sterling

GBP

Canadian Dollar

CAD

—

Cash Flow Hedging Strategy

To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company instituted a cash flow hedging program. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are cash flows associated with forecasted revenues). The Company includes time value in hedge relationships.

The Company expects $9 million of the accumulated other comprehensive income (loss) will be reclassified into earnings within the next twelve months with an offset by gains from the underlying transactions resulting in no impact to earnings or cash flow.

Non-designated Hedging Strategy

The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The gain or loss on the derivative instrument is recognized in earnings in other income (expense), together with the changes in the hedged nonfunctional monetary accounts.

The amount of gain (loss) recognized in other income (expense), net was ($7) million and ($3) million for the three and six months ended June 30, 2019, and ($19) million and ($8) million for the three and six months ended June 30, 2018, respectively.

The Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
	Balance Sheet	June 30,		December 31,		Balance Sheet	June 30,		December 31,
	Location	2019		2018		Location	2019		2018
Derivatives designated as hedging instruments under ASC Topic 815

Foreign exchange contracts	Prepaid and other current assets	$	1	$	2	Accrued liabilities	$	16	$	17
Foreign exchange contracts	Other Assets		—		—	Other liabilities		3		11

Total derivatives designated as hedging instruments under ASC Topic 815		$	1	$	2		$	19	$	28

Derivatives not designated as hedging instruments under ASC Topic 815

Foreign exchange contracts	Prepaid and other current assets	$	4	$	4	Accrued liabilities	$	4	$	6
Foreign exchange contracts	Other Assets		1		—	Other Liabilities		—		2

Total derivatives not designated as hedging instruments under ASC Topic 815		$	5	$	4		$	4	$	8

Total derivatives		$	6	$	6		$	23	$	36